1 eFX Daily colour

1.1 FX Spot

1.1.1 Overview

(Feb-12) Asian equities rose due to US-Russia talks, sparking hopes for an end to the war in Ukraine and improving prospects for Chinese markets. This boosted risk sentiment, with European stock index futures and S&P 500 contracts advancing despite higher-than-expected US inflation figures. The euro strengthened 0.5% against the dollar, now trading at 1.0434 and the pound strengthened 0.40%, now trading 1.2495, as market sentiment improved.

Oil prices declined, speculating eased risks to Russian supply, while shares of aluminum producer United Co Rusal International PJSC surged in Hong Kong. However, Asian shipping stocks fell on concerns about dropping freight rates amid easing geopolitical tensions.

  • OIL trades at $74.47 per barrel, a reduction of about 0.64% from the open px.

The dollar index (DXY) ticked lower as investors awaited clarity on possible reciprocal tariffs. President Trump agreed with President Putin to negotiate an end to the Ukraine war, surprising European allies. The market has adjusted bets on US rate cuts, now projecting a single reduction in December.

  • DXY trades at 107.55, a drop of about 0.29% from the open px.

Gold held its rally, nearing its record high.

  • Gold trades at 2915.79, just below its all time high of 2942.68.

The rand, after closing higher for 3 straight days has regained ground at the back of boosted risk sentiments:

  • USDZAR trades at 18.46, below the 18.60 pivot level which signals easing pressure of the local currency.

Against the crosses:

  • EURZAR trades at 19.2705
  • GBPZAR trades at 23.0705

1.1.2 US

(Feb-06) US Jobless claims rose by 11K to 219K for the week ending February 1, staying relatively low. This level is consistent with pre-Covid figures, and private employment data indicates strong hiring in January. However, despite a calm January, several major companies have announced staff reductions for early February, hinting that the quiet period may be short-lived. USDZAR saw a slight rally after this to a low of 18.5740 on a 15min window.

(Feb-10) The dollar made some inroads on a daily basis, now trading 108.19 vs friday’s close of 108.09. Gold reached a record high of 2911.04$/oz due to President Donald Trump’s plan for steel and aluminum import tariffs, causing market disruption. Both the dollar and gold rose as demand for safe-haven assets increased amid the trade threats.

(Feb-11) The risk of further tariffs still has room to boost the dollar, which has been on a more bearish trend so far this year.

(Feb-12) The market is closely watching the upcoming US CPI data at 15:30 SAST.

(Feb-13) CPI print yesterday supported FEDs decision to hold rates steady and the general talks between US and Rassia to end the war has boosted risk sentiments.

1.1.3 SA

(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.

  • ZAR has since made some gains, now trading +/- 18.50 lvls, signalling that the market is not yet too worried about these developments.

1.1.3.1 eFX Volumes

  • Overall volumes

(Feb-10) On Friday (07-Feb) we saw a turn from balance or net short USDZAR position to being net long USDZAR from clients. (*) This is not surprising given the recent growing tensions between SA and the US.

(Feb-11) Client remain net-long USDZAR despite the Rand showing some strength in yesterdays session.

(Feb-12) Continued pull-back on volumes, with yesterdays volumes being 15% lower than recent ADV.

(Feb-12) Volumes improved slightly yesterday, as the US CPI come out higher than expected.

  • Price to volumes

(Feb-10) Latest implied topside is 18.65 but we could go higher if there is not indication of a de-escalation between SA and the US.

(Feb-11) ZAR has stabilized at the 60-DMA of 18.4439.

(Feb-12) New implied topside at 18.6750 with associated bottom at 18.40. US CPI data is critical today, market seems convinced that we will end the day trading higher.

(Feb-13) Clients ended yesterday being net-short ZAR: - Range for today: 18.60 - 18.30.

  • Liquidity hours across currency pairs
  • Currency positions

(Feb-10) Clients are now net-long USDZAR.

(Feb-11) We see continued net-long positions in ZAR.

1.1.3.2 USDZAR levels

(Feb-10) We saw the market gab in the early morning and ZAR gained some lost ground now trading at 18.41.

(Feb-11) From above, it is evident that the move lower in ZAR ended on the 6th of Feb, after that, we see ZAR range trading, without an significant move. This is a clear demonstration that the market is in a “wait and see” environment and is not ignoring the recent developments.

  • It would be premature for now to think ZAR will continue trading lower, range trading seems to be the most likely scenario and a tight range would be 18.60 - 18.35.
  • Volume weighted price for ZAR remains at 18.70.

(Feb-12) New implied topside at 18.6750 with associated bottom at 18.40. The Rand may struggle to make inroads against USD today, unless US CPI surprises. The market is expecting a general cool down in CPI and a confirmation of whether the proposed tariffs have an inflationary impact.

(Feb-12) US Inflation print sees US-Russia talks to end war and thus had boosted risk sentiments.

  • Range for today: 18.60 - 18.30

1.1.3.3 USDZAR spreads

(Feb-10) ZAR benefits from:

  • Gold hits all time high of 2911.04
  • JSE Top 40 also trades record high at 80139.26
  • DXY trades lower compared to open. We note however that USD has made some inroads given Friday’s close was 108.04 and we were trading higher than that today.

(Feb-11) ZAR ends the day slightly stronger at 18.44 vs open at 18.4486. Spreads continue to be elevated but today we saw some moderation, perhaps at the back of reduced volumes seen today.

(Feb-12) Near term Fed cut fades as inflation prints higher than expected. Core CPI, which excludes food and energy costs, increased 0.4% in January after a 0.2% advance in December, supporting the Federal Reserve’s cautious approach to lowering interest rates. Additionally, policymakers are waiting for more details on President Donald Trump’s policies, especially tariffs, which are raising consumer inflation expectations.

  • We saw USD strengthen across the board after CPI print.

(Feb-13) A move lower for ZAR seems likely today at the back of boosted risk sentiments.

1.1.4 Key events this week:

  • UK industrial production, GDP, Thursday
  • Germany CPI, Thursday
  • Eurozone industrial production, Thursday
  • Norges Bank Governor Ida Wolden Bache gives annual address, Thursday
  • Eurozone GDP, Friday

1.2 FX Volatility Update

1.2.1 Update

By Thuto Mukena - Institutional Sales Specialist (Feb-13)

  • Overview

The Rand was the second-worst performer among EM currencies, trailing only the Colombian Peso, as uncertainty over Trump’s tariffs persisted. Adding to the pressure, U.S. inflation came in slightly higher than expected at 3.0% y/y vs. 2.9% consensus, extending USD/ZAR’s losing streak to a third consecutive session, with the pair closing at R18.5254/$. Despite this, local implied vols continued to signal a more stable outlook ahead, the USD/ZAR implied vol curve adjusted lower across all tenors, with 1-week implied vol falling by 1.04 vol points to 11.80%.

  • EM & G10

Peace talks between Trump and Putin sends implied vols lower across both G10 and EM. The US dollar continued to see some momentum lower, as the positions some ease in risk conditions ahead. In late session, USD/CHF and USD/CAD 1-week implied vols led the declines, dropping 98bps and 78bps, respectively. Meanwhile, in high-beta FX, USD/MXN and USD/CNH 1-week implied vols fell by 180bps and 31bps, respectively.

1.3 Africa

1.3.1 Update

By sizwe Mfayela - Institutional Sales Specialist (Feb-13)

  • Egypt
    • President Abdel Fattah al-Sisi has indefinitely postponed his 18 Feb Washington DC visit following US President Donald Trump’s plan to cut aid and displace Palestinians from Gaza.
  • Kenya
    • Kenya’s January YoY overseas remittances increased 3.63% vs 19.5% in December to an overall $427.7mio
  • Namibia
    • Namibia’s central bank cut interest rates by 25bps for the fourth consecutive time, to 6.75%. the central bank forecast’s the country’s economic growth to be 4.0% for the 2025 fiscal year.
    • Johannes Gawaxab, the Namibia central bank governor has cautioned the increasing tensions between the US and South Africa could destabilise the Namibian economy due to the close ties the nation has with South Africa.
  • Senegal
    • Senegal’s state auditor report affirmed the country’s debt to GDP ratio for 2019 was 99.7% in 2023 from 65.6% in 2019, with a budget deficit of 12.3% of GDP vs 4.9% as previously estimated. The findings led to Senegal’s Eurobonds selling off yesterday.
  • Tanzania
    • Tanzania’s 2024 budget deficit reduced 29% YoY to $2.11bio from 2.96bio in the prior year, boosted by higher earnings in mining, tourism and agriculture alongside lower oil imports.
  • Zambia
    • The Bank of Zambia hiked interest rates by 50bps to 14.5% in efforts to curb inflation and support the country’s exchange rate. Zambia inflation has persistently remained above the central bank’s upper target band with Jan YoY CPI printing at 16.7%. The central bank’s inflation target band is 6% - 8%.
  • Eurobonds
    • A Strong session overall, with SSA risk trading firm post CPI. NGERIA outperformed, trading pre and post CPI, to close ~20bps tighter. Overall, selling cares weren’t much and in fact there were buyers of risk coming through.
    • Senegal was the centre of attention, with the long-awaited audit results coming out worse than expected. Bonds traded as lower 3.00-3.25pts on the news, but were met with buying cares at those levels, to eventually retrace back to -1.00-1.25pts on the day.

1.3.2 Economic data

Economic data releases